Barclays to fight $453m fine upheld by regulators

File photo dated 12/4/2011 of a general view of a branch of Barclays, in central London, as the lending giant has lured a top US banking executive to become its new finance director with a potential ?6.2 million pay package. PRESS ASSOCIATION Photo. Issue date: Tuesday July 16, 2013. The bank said Tushar Morzaria, chief financial officer at JP Morgan Chase's investment bank, will join in the autumn and formally replace outgoing finance director Chris Lucas in February. See PA story CITY Barclays. Photo credit should read: Dominic Lipinski/PA Wire

The Federal Energy Regulatory Commission (FERC) has upheld fines of $453m (€345m) imposed on Barclays and four of its power traders for energy market manipulation.

FERC pointed to the "the seriousness of the violations and the lack of any effort by Barclays and the traders to remedy their violations" for its decision.

Barclays has previously contested FERC’s findings and said it will “vigorously” fight the order in court.

“We believe that our trading was legitimate and in compliance with applicable law,” Barclays spokesman Marc Hazelton said in a statement. “We intend to vigorously defend this matter.”

The fine was first imposed in October 2012. In a defence filed with a US court shortly after FERC's sanction, Barclays said the evidence supplied against it was “plainly insufficient”.

Barclays said the regulator’s case was “unsupportable” and relied “heavily on its subjective interpretations of a few snippets of emails and instant messages”.

Emails cited by FERC in its judgment last year appeared to show Barclays staff detailing how they allegedly rigged electricity trading in the western United States.

One email from Barclays trader Ryan Smith described how he “f***ed with the Palo market” and “propped up the palo index”. He wrote: “Gonna try to crap on the NP light and it should drive the SP light lower.”

Mr Smith, along with three other Barclays traders, were each fined $1m by FERC. The largest individual fine was reserved for Scott Connelly, managing director of North American power at Barclays, who was provisionally ordered to pay $15m after being described as the “leader of the manipulative scheme”.

At the end of last year Barclays dismissed the case against Mr Connelly and said the emails gathered by the regulator to highlight his “bad intent” showed “no such thing”.

“There is no evidence that Mr Connelly ever instructed his traders to enter into uneconomic trades for any reason, much less supposedly benefit financial positions, or that he otherwise engaged in any kind of manipulative conduct,” he said.

FERC’s report claimed that over 655 trading days, Barclays’ alleged manipulation of the electricity market cost other firms nearly $140m as its traders apparently drove power prices up and down to the benefit of derivatives positions held by the bank.

Barclays said the accusation was not “lawful” and added that the regulator’s claim was not based on “sound economic theory”.

“These supposed principles are not the law and, if adopted and applied generally, would drive participants from power markets, resulting in less liquidity and greater volatility,” said the bank.

It added that allegation that the “pattern” of its manipulation continued after the regulator began its investigation was not credible.

“It strains credulity that a major financial institution would continue the very conduct that was under investigation if it thought the conduct in question was in any way improper,” the bank said.

On Tuesday, FERC gave Barclays 30 days to pay the fine to the US Treasury.